Your firm produces fan merchandise for a football team. You want to assess if the four items manufacturedjerseys, caps, scarves and shorts are being produced optimally. In order to do this you increase each of the inputs (capital and labor) by one unit at a time and record the change in output from the current level for jerseys and caps while you decrease the inputs by one unit at a time and record the change in output from the current level for scarves and shorts. Currently, w = $25 and r = $40. The following tables record the different input and output levels. Use the values in the tables to arrive at your conclusions about the four production processes.

Use the relation MPK_K(K, L) / MPL_L(K, L) = r / w to determine if production is optimal. If you conclude that production is not optimal then argue how the input levels should be adjusted for each of the four items: a) Jerseys b) Caps c) Scarves d) Shorts.

Table 2: Output and Input levels: Production of Caps Tahle 3 Outunt and Innut levels Production of Searves Table 4: Output and Input levels: Production of Shorts